As the Competition Commission considers whether to renew a fresh complaint over exclusivity clauses at shopping centres, a business owner has spoken out claiming that such contracts offered by mall owners to large retailers effectively bulldoze small businesses into paying higher rentals.
Shopping centre owners often grant major retailers exclusivity clauses agreements, which often have renewal options of up to 40 years.
These give major retailers exclusive rights to trade in a mall at lower rental rates, while precluding a landlord from letting premises to tenants which may sell competing products.
Kamlesh Chagan, owner of American Clothing in Cavendish Square Shopping Centre, says exclusivity clauses for major retailers make it difficult for small retail businesses in malls to survive.
“The high rental is the very reason why independent (small) businesses fail in malls. Mall owners (by charging high rentals) are stifling the longevity of independent businesses.”
Chagan, whose store has been operating from the upmarket Claremont mall for more than 15 years, says he pays R500 per square metre for their 120 square metre space (R60 000 a month).
He says even though the mall provides a captive market and a safe environment as well as seasonal promotions, his other street trading stores are proving more profitable as its rental expenses are lower.
And he is not the only business owner who risks losing business over these practices. A business owner who operates a store selling sweets in the Promenade Mall in Mitchell’s Plain, says she leases her space for R30 000 a month.
The owner, who asked not to be named, says she had to take out a second bond in order to keep up with her rental payments and to keep her business afloat after repeatedly falling victim to stock theft from customers as well as staff.
“My staff turnover rate is high. It has gotten to the point where you just cannot employ anyone in good faith anymore. I have had to step in and since I have been on site my stock bill has come down.”
She says the foot traffic in the mall is at its peak over weekends and at month’s end and at its lowest from Monday to Thursday.
The South African Property Owners Association (Sapoa) in October asked the Competition Commission to review the practice of exclusivity lease clauses which the association says is in violation the Competition Act.
Earlier this year, the commission concluded an investigation into exclusive leases and their use by three major supermarket groups (Pick n Pay, Shoprite and Spar) and found that the anti-competitive effects of the conduct could not be demonstrated conclusively. The matter was not referred to the Competition Tribunal.
Sapoa chief executive Neil Gopal says exclusivity clauses restrict competing retailers, including independent and small retailers, from entering the market.
“But it isn’t only competing chains that are excluded. Specialist stores like fruit and vegetable sellers, liquor stores, as well as full-line grocery stores are excluded.”
Competition Commission spokeswoman Mava Scott confirmed that Sapoa had requested that the commission take another look at exclusive clauses in long-term lease agreements between owners of large retail shopping centres and retail anchor tenants.
“The commission is currently screening the complaint and will determine whether to launch a full-scale investigation or not,” commented Scott.
PrimeMedia Lifestyle, PR managers for Cavendish Square, refused to comment on the matter.